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"If you're going to panic, do it fast and beat the crowd." ~ Jesse Livermore

Tuesday, February 26, 2013

Bill Gross: Be very afraid of the markets

Bill Gross: Be very afraid of the markets - The Buzz - Investment and Stock Market News: "Bond guru and Pimco (PTTRX) managing director Bill Gross isn't buying into the bull market. In fact, he's warning investors to be afraid, be very afraid, of how inflation and the flood of cheap money will affect all investments. Investors should be prepared to accept "lower returns on bonds, stocks, real estate and derivative strategies," Gross wrote in his monthly letter entitled "Credit Supernova!" Championing something of a bunker mentality, Gross told investors to buy Treasuries with shorter durations and buy gold or other investments that "you can sink your teeth into." Go outside of the U.S., he says. Buy currencies from countries "with less hyberbolic credit systems" including Australia, Brazil, Mexico or Canada. The U.S. won't fit that bill. He doesn't suggest totally eschewing stocks, but says investors should look to global stocks with stable cash flows. Gross has been warning investors about the potential downsides of the Federal Reserve's bond buying strategy for months, but the tone of this month's letter was decidedly more fearful. While the letter's title obliquely references the band Oasis, Gross opted to lead his monthly missive with an ominous T.S. Eliot quote rather than his usual song lyric: "This is the way the world ends... Not with a bang but a whimper. . . . "

It’s Time to Go 'Risk Off': "Insiders Are Bearish: Corporate insiders are selling stock at the fastest clip since late July 2011, according to some reports. The S&P 500 crashed 15% in a matter of weeks soon after that point — and it took the index about seven months to claw back those losses before moving higher. Sure, insiders might just be trying to take a little bit of profit while their company stock is at multiyear highs … but it could be more than that. Valuations Are High: And whether you’re an insider or not, it’s worth looking at your own portfolio and considering how your stocks are valued vs. historical norms. The S&P 500 has a trailing 12-month price-to-earnings ratio of 17.9 as of this writing vs. 15.1 a year ago; the Nasdaq-100 has a P/E of 16.6 vs. 11.1 a year ago; the Dow Industrials have a P/E of 15.4 vs. 14.4 a year ago. These figures are high not only compared to recent valuations, but also to historical norms. . . ."

Insiders now aggressively bearish - Mark Hulbert - MarketWatch: "This is worrisome because corporate insiders — officers, directors and the largest shareholders — presumably know more about their companies’ prospects than the rest of us do. If they were confident that the shares of their companies would soon be trading markedly higher, they wouldn’t be selling them now. Yet selling they are — at an alarming pace. Consider an insider indicator calculated by the Vickers Weekly Insider Report, published by Argus Research. The indicator is a ratio of all shares that insiders have recently sold in the open market to the number that they have purchased. For the week that ended last Friday, this sell-to-buy ratio for NYSE-listed shares listed stood at 9.20-to-1. That means insiders of these companies, on average, were selling more than nine shares of their firms’ stock for every one that they were buying."

Virginia in the Vanguard - The New York Sun: " . . . This is why, when the Constitution was written, it prohibited the states from coining money or emitting paper money or making “any Thing but gold and silver Coin a Tender in Payment of Debts.” This means that Virginia can’t make its own coins, but it can make gold and silver coins legal tender within the state. More than a dozen states are exploring doing just that, spurred, at least in part, by the American Principles Project and also by the collapse in the value of the fiat dollars being issued by the Federal Reserve. It’s unclear at the moment whether the measure in Virginia will clear the state’s senate. . . . "